DOING BUSINESS in DENMARK 2018 Introduction

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DOING BUSINESS IN DENMARK 2018 Introduction

The purpose of this publication is to give an introduction to set up a new business in Denmark, we recommend further those considering conducting business in Denmark, either professional assistance. by establishing a company or a branch or in other ways. The information presented in this publication was assem- Our intention is to provide a description of the business bled by Revitax A/S. environment and the main aspects of the legal framework of Danish business life. For readers actually planning to Copenhagen, October 2017

2 Doing Business 2018 / Introduction Contents

Business forms...... 4 CFC taxation (taxation of Controlled Financial Companies)...15 Public limited companies (Aktieselskaber)...... 5 Filing a tax return...... 15 Private limited companies (Anpartsselskaber)...... 6 Payment and collection...... 15 Branches (of foreign limited companies)...... 6 Tax audits...... 16 Representation offices...... 6 Penalties...... 16 MS entity...... 6 Statute of limitations...... 16

Accounting requirements...... 7 Calculation of the taxable income...... 17 Form and contents of the annual report...... 7 General comments...... 17 Stock valuation...... 17 Audit requirements...... 8 Dividend income...... 17 Bookkeeping requirements...... 9 Capital gains and losses...... 18 Establishment...... 10 Deductions...... 19 Establishment procedures...... 10 Transfer pricing...... 23 Purchase of shares in a shelf company...... 11 Joint taxation...... 24 Registered branch office...... 11 Taxation of individuals...... 26 Choice of business form...... 12 Territoriality and residence...... 26 Corporation Taxation...... 13 Expatriates with high salaries...... 26 Tax rate...... 13 General rules for taxation of individuals...... 26 Company residence and territoriality...... 13 Value-added tax...... 29 Permanent establishment...... 13 Distance selling – sale of goods to private customers...... 29 Danish income subject to withholding tax...... 13 Withholding taxes...... 30 Tax losses...... 14

Contents / Doing Business 2018 3 Business forms

Business can be conducted through companies, by part- A company – the most common form being a public or pri- nerships or by individuals acting as sole traders. vate limited company – is a distinct legal entity established to separate its business affairs from the personal affairs of its proprietors. The business of sole traders and partnerships is not distinct from the personal affairs of the proprietor(s). The pro- A company can only cease to exist when it is wound up prietor has unlimited liability for the debts of his business. following legal framework. This means that a company

4 Doing Business 2018 / Business forms can carry on as long as there are individuals appointed to Foreign individuals and companies are allowed to own a act on its behalf despite e.g. the death or retirement of an Danish company by 100 %. individual. If the equity of a company represents less than 50 % of the Investors are free to choose their preferred form of entity. subscribed capital, an account of the financial situation and However, to set up branch operations most non-EU/EEA measures to be taken must be given to the shareholders at residents must have permission (based on a declaration of a general meeting. reciprocity) by the Danish Business Authority. The management Most foreign investors prefer to set up a new business The management may consist of either a board of directors under one of the following types of companies, as they are (a minimum of 3 persons) and the managing director(s) regulated by law: (a minimum of 1 person), or a board of managing directors supervised by a supervisory board (a minimum of 3 • Public limited companies (Aktieselskab, abbreviated: persons). A/S). • Private limited companies (Anpartsselskab, abbreviated: The board of directors is elected by the shareholders at the ApS). annual general meeting and its primary task is to ascer- • Branches (of foreign limited companies). tain a sound organisation and to set out guidelines for the managing director. Therefore, other ways of establishing a business will not be dealt with here. If the company employs more than 35 persons for 3 consecutive years, the employees are entitled to be represent- However, it is also possible to establish a SE company ed on the board of directors or on the supervisory board. (European Company) and a SCE (European Co-operative Company) in Denmark. The board of directors appoints the managing director. The managing director’s primary task is the day-to-day man- The Danish Business Authority charges a duty for register- agement of the company. ing a company. Statutory publication Public limited companies The following details of the company must be filed with the (Aktieselskaber) Danish Business Authority, where part of the information is The liability of each shareholder is limited to the amount publicly available, e.g.: of shares subscribed (irrespective of them being fully paid up or not) or alternatively the purchase price of the shares • Denomination of the share capital. acquired. • Names and addresses of the founders of the company. • Names and addresses of the members of the board of A public limited company must have a share capital of a directors and the managing director(s). nominal value of at least DKK 500,000. Only 25 % or DKK • Articles of association. 125,000 of the initial share must be fully paid up before • The annual report. registration when the capital is injected in cash. The capital may also be injected in other assets.

Business forms / Doing Business 2018 5 Shareholders are registered in a register at the Danish A branch in Denmark acts under Danish law. The name Business Authority. However, only shareholdings of at least of a branch must show its status as a branch of a foreign 5 % of the capital or votes are publicly available. limited company and its nationality. The branch must be managed by a branch manager. Private limited companies (Anpartsselskaber) Each year the annual report of the foreign company must In general, private limited companies are regulated by the be filed with the Danish Business Authority, where the same laws as described above for public limited companies. report is publicly available.

The main differences are: Representation offices • A minimum share capital of DKK 50,000 is required. Establishment through a representation office is an option, The initial share capital must be fully paid up before if the activities are limited to being of an “auxiliary and pre- registration. paratory nature”. Such activities cannot include any kind of • The management may consist of either a board of sales activities, nor power to enter into binding contracts managing directors, or a board of directors and the on sales on behalf of a non-resident company. managing director(s), or a board of managing directors supervised by a supervisory board. The activities included in the definition of a representation • A board of directors or a supervisory board is only office could be the gathering of information for the foreign required if the company employs more than 35 persons company or maintenance of a showroom. However, in case for 3 consecutive years. If so, the employees are entitled of maintaining a showroom, no individual in the represen- to be represented on the board of directors or on the tation office can have the authority to enter into contracts. supervisory board. The foreign company must register the activities of the rep- Entrepreneurs may register an IVS (Iværksætterselskab) resentation office with the Danish Business Authority and with less than DKK 50,000 in share capital. It is required point out a representative in Denmark. The representative that the capital is injected in cash (at least DKK 1). The must sign a declaration confirming that he or she is the IVS is regulated by the same laws as described for private representative of the foreign company. limited companies, however 25 % of the annual net profit must be transferred to the company’s capital reserves until MS entity reaching DKK 50,000 and dividend cannot be distributed, In a pilot period (ending ultimo 2017), a Danish A/S or ApS before the share capital and the capital reserves amount to and its employees can establish a MS entity (medarbejder- DKK 50,000 in total. investeringsselskab). For legal purposes, it is a partner- ship on co-ownership regulated by specific rules. For tax Branches (of foreign limited companies) purposes, it is a company. Each employee can invest a Foreign limited companies can carry out activities through maximum of DKK 30,000 of their salary in the MS annually a branch in Denmark. for max 5 years.

A branch must be registered with the Danish Business Authority, and it must be certified that the foreign company is registered in accordance with the legislation of its home country.

6 Doing Business 2018 / Business forms Accounting requirements

The board of directors and the managing director are ing Standards (IFRS). Non-listed companies may choose to responsible for the maintenance of sound accounting re- comply with IAS and IFRS as well. cords and for the preparation of annual reports, covering each financial reference period. The Danish Financial Statements Act follows Accounting Directive 2013/34/EU which repeals the EU 4th and 7th Ac- counting Directives. The management report prepared by the board of directors and the auditors’ report are integrated parts of the annual According to the Act, a listed company must prepare an report. annual report consisting, as a minimum, of:

The annual report must be approved by the shareholders at • A statement by the board of directors and the manage- the company’s annual general meeting. ment on the annual report. • A balance sheet. The annual report must be filed with the Danish Business • A profit and loss account. Authority without undue delay after the approval at the • A cash-flow statement. general meeting and no later than five months after the • Disclosures, including disclosure of accounting policies. end of the financial year. Governmental and listed compa- • A statement of changes in equity as well as a manage- nies must file the report no later than four months after ment report. the end of the financial year. • An auditors’ report.

Form and contents of the annual report Small and medium-sized companies may be exempt from The disclosure requirements and the form and contents of some of the disclosures. Such companies are free to the annual report are set out in the Danish Financial State- choose an “extended review” as well (which is a review with ments Act. In addition, the annual report must comply with four extra obligatory actions). Micro companies as adopted Danish accounting standards. If a company is listed, the in the 2012/6/EU Directive may be exempt from some of the annual report must comply with the International Account- disclosures as well. ing Standards (IAS) and the International Financial Report-

Accounting requirements / Doing Business 2018 7 Audit requirements

All limited companies must be audited by an independent Financial Statements Act and whether it gives a “true and auditor (in certain cases very small companies may be fair view” of the company’s state of affairs at the balance exempted). The auditor is appointed by the shareholders sheet date as well as of the profit or loss in the financial at the general meeting. period.

Auditors must comply with the auditing standards pub- During the year the auditor reports to the board of direct- lished by the Danish Institute of State Authorised Public ors. In addition, the auditor provides the shareholders Accountants and Registered Accountants (FSR-Danske with an auditors’ report, which is an integrated part of the revisorer), which is a member of the International Federa- annual report. tion of Accountants (IFAC). Hence, audit must be performed in accordance with the International Standards on Auditing The auditors’ report must state whether the annual report (ISA). complies with the disclosure requirements of the Danish

8 Doing Business 2018 / Audit requirements Bookkeeping requirements

When doing business in Denmark, bookkeeping must be Electronic accounting records can be stored abroad, i.e. made in accordance with the Danish Bookkeeping Act: on a server located abroad, if they are stored in such a way that they may easily be made available to Danish public authorities entitled to claim insight into the accounting Under the Danish Bookkeeping Act, bookkeeping material records according to other legislation. It is further required must be saved for a period of five years. that the storage complies with the Bookkeeping Act’s requirement for: Hard copy accounting records must in general be stored in Denmark. The records must be stored in such a way that • e.g. registration, documentation and storage period, and they may easily be made available to Danish public authori- procurement of the records at any time and on-line ac- ties entitled to claim insight into the accounting records cess to the records in Denmark, and according to other legislation. • storage of all descriptions of the system applied etc. and necessary codes etc. in Denmark, and However, the Danish Business Authority may permit the • ensuring that the accounting records can be printed in accounting records to be stored in another Nordic country, hard copy (paper or micro film in a readable form) or be if the storage complies with the Bookkeeping Act and pro- made available in other recognized file format. vided the company can procure the records at any time. If the accounting records contain personal data, the Storage outside the Nordic countries is only possible with processing of such data must comply with the rules of the respect to storage of accounting records for the current Personal Data Act. and previous month and with respect to storage of accounting records relating to foreign activities.

Bookkeeping requirements / Doing Business 2018 9 Establishment

A foreign investor planning to set up a subsidiary in Den- Establishment procedures mark may either form a new company or purchase the A memorandum of association must be prepared and shares in an existing company (“shelf” company). signed by the founders. The memorandum of association

10 Doing Business 2018 / Establishment must contain draft articles of association, including the new members for the board of directors, and to appoint following information: the auditor. The articles of association must be changed in respect of the name, the objectives and frequently also • Name of the company. the financial year. The changes adopted at the sharehold- • Objective of the company. ers’ meeting must be registered with the Danish Business • Share capital. Authority. • Share capital rights. • Management body. The registration must be made on-line in the Danish • Annual general meeting. Business Authority’s digital registration system (only MS • Financial year. entities are exempted).

Furthermore, the memorandum of association must pro- Registered branch office vide information such as the names and addresses of the A registered branch office of a foreign company is entitled founders, the share subscription price, the deadlines for to carry out any business activity included in the objectives subscription and for payment of subscribed capital. of the foreign company. The foreign company must register the branch office with the Danish Business Authority. The The final decision to found the company may be made at registration must be made on-line in the Danish Business the shareholders’ first meeting. If so, the shareholders Authority’s digital registration system. elect the members of the board of directors and appoint the auditor when the resolution to found the company has If the foreign company’s home country is within the EU/ been passed. EEA, the following documents must be submitted:

The board of directors is obliged to register the company • A certification on the legal existence of the foreign com- with the Danish Business Authority within 2 weeks as from pany in its home country. the signing of the memorandum of association. • A certified power of attorney to a branch manager. • Documentation with respect to the person authorised to A company in the process of incorporation – e.g. a company sign for the foreign company (e.g. passport number). which has not yet been registered – is not considered an independent entity. Therefore, the founders are liable for the If the foreign company’s home country is outside the EU/ activities of the company. EEA, the following documents may also be required:

Upon registration the company takes over all liabilities, • A copy of the foreign company’s articles of association. including the liabilities related to activities carried out be- • A copy of the foreign company’s incorporation certifi- tween the date of founding and the date of registration. cate. • Further, a statement from the relevant foreign author- Purchase of shares in a shelf company ity in question confirming that a Danish company can Several law firms own registered companies which have register a branch in the foreign country (most countries not yet carried out any business, i.e. shelf companies. outside the EU/EEA, but there are a few exemptions).

Immediately after the acquisition, an extraordinary shareholders’ meeting must be held in order to vote for the necessary changes to the articles of association, to elect

Establishment / Doing Business 2018 11 Choice of business form However, some of the more essential tax aspects as well Commercial considerations should be of overall impor- as other important factors are briefly listed below. tance in the investor’s choice of business form in which a particular activity should be organised.

Subsidiary Branch Representation office

Establishment + Can be bought readily incorp ÷ May not be available to compa- + Only a few formal establish- orated and the shares can be nies resident in certain countries. ment procedures. owned irrespective of the nationality of the shareholders. ÷ The scope of activities possible is rather limited and it cannot engage in sales activities or conclusion of contracts.

Annual report +/÷ Must prepare and file audited +/÷ Must file the audited annual + Annual report is not re- annual report. report of the head office. quired.

Changes in structure ÷ Additional formal require- +/÷ Easy to close down, but may + Easy to close down. ments in respect of e.g. result in taxation on capital changes in capital, capital gains, as assets are considered requirements, winding-up, etc. sold/transferred or if the branch is converted into a subsidiary later on (exception possible for branches of SE companies).

Liability + Liability limited to the sub- ÷ Head office and branch ÷ Head office is fully liable for scribed capital. manager are fully liable for the activities/liabilities of the the activities/liabilities of the representation office. branch.

Cross border + Can be used for cross border ÷ Cannot be used for cross ÷ Cannot be used for cross activities, e.g. holding company border activities. border activities. and R&D company.

Dividends + No withholding tax on dis- + No withholding tax on pay- Not applicable – no profit to be tribution of profit to corporate ments of profits to the head distributed. 10 % shareholder or group office. company within the EU/EEA/ a tax treaty country.

+ Possible to distribute interim dividend if provided for in the articles of association.

Transfer pricing +/÷ Must comply with transfer +/÷ Must comply with transfer + Not taxable in Denmark. pricing regulation similar to pricing regulation similar to OECD guidelines. OECD guidelines.

12 Doing Business 2018 / Establishment Corporation Taxation

Tax rate In addition, non-resident companies are subject to tax on Taxable income – including capital gains – is subject to a income from real property in Denmark. corporate tax of 22 %. The tax rate is identical for public limited companies, private limited companies and branch- Non-resident companies are obliged to file a Danish tax es. return to declare such income.

Company residence and territoriality Danish income subject to withholding tax Unlimited tax liability Certain types of payments to non-residents are subject to Generally, a company resident in Denmark is subject to Danish withholding tax, which may be reduced according to corporate tax on its income and gains from Danish territory. a tax treaty or an EU Directive.

A company is resident in Denmark for tax purposes if it is Dividends incorporated in Denmark and its effective management is Dividends from Danish companies can be distributed with- situated within the country, or if it is incorporated abroad out withholding tax provided that: and its effective management is in Denmark. Effective management is determined on the basis of the place of the a) The foreign company qualifies as a company under day-to-day business decision making. Danish rules and b) the foreign company is the “rightful owner” and Danish anti-avoidance tax rules may reclassify a Danish in- c) the foreign company directly owns at least 10 % or corporated group company as a permanent establishment more of the Danish company and of a foreign company if considered a transparent entity d) the distribution of dividend to the foreign company is under foreign tax rules. protected by either the EU Parent/Subsidiary Directive or by one of Denmark’s tax treaties. Limited tax liability Foreign companies can be subject to limited tax liability The exemption also applies to participants in foreign either through a branch or a permanent establishment receiving entities considered as transparent entities under or through withholding taxes on certain types of Danish Danish tax rules but being included in the list to the EU source income. Parent/Subsidiary Directive – but only if the participants in the foreign entity are not tax residents in Denmark. Due to Danish anti-avoidance tax rules, a branch may be reclassified as a company if considered a company under or if foreign tax rules. Further, a permanent establishment of a a) the foreign company qualifies as a company under foreign group company may be reclassified as a permanent Danish rules and establishment of another foreign group company, if the b) the foreign company is the “rightful owner” and foreign group company is considered a transparent entity c) the foreign company has decisive influence directly under foreign tax rules. or indirectly (e.g. more than 50 % of the votes) in the Danish company and Permanent establishment d) the foreign company is resident in an EU/EEA member Non-resident companies conducting business in Denmark state and through a permanent establishment (e.g. a branch) are e) the distribution would be protected either under the EU subject to tax on all income attributable to or received by Directive or the relevant tax treaty had there been an the establishment. ownership of at least 10 %.

Corporation Taxation / Doing Business 2018 13 The above exemption only applies if the Danish distributing The withholding tax rate on royalties is 22 % subject to company is not considered as a ”flow-through entity” for treaty relief. Danish tax purposes. In a “flow-through entity” situation the exemption only applies if the receiving entity is pro- Royalty payments to a receiving associated company in an- tected by the EU Parent/Subsidiary Directive. other EU member state are exempt from Danish withholding tax if the requirements under the EU Interest/Royalty Otherwise, the withholding tax rate in the relevant tax Directive are met. treaty applies. Royalty payments for the use of any copyright to literary or If no tax treaty exists, Denmark withholds 22 %. However, artistic work are not subject to Danish withholding tax. the Danish 22 % rate is reduced to 15 % under the domestic tax rules if the foreign company holds less than 10 % Interest of the Danish company and the tax authorities in the state Generally, Denmark does not levy withholding tax on inter- where the foreign company is tax resident exchange infor- est payments to non-residents. mation with the Danish tax authorities under the relevant tax treaty or according to an administrative tax assistance Only interest payments from a controlled Danish company agreement. If the receiving company is tax resident outside (more than 50 % of shares or votes) made to non-resident the EU, the ownership percentage is calculated on an ag- companies are subject to Danish withholding tax. The with- gregated group company basis. holding tax rate is 22 %.

The exemptions require that the Danish company can The Danish withholding tax does not apply to interest pay- certify that the foreign company meets the conditions prior ments on controlled debt to a foreign company protected to the payment of the dividend. If not, the Danish company by either a tax treaty or the EU Interest/ Royalty Directive - must withhold tax on the dividend at a rate of 27 % (subject and further exemptions with respect hereto are available. to treaty relief) and subsequently reclaim the withholding tax from the Danish tax authorities. Denmark has General Anti-Avoidance Rules (GAAR) covering transactions under the EU tax directives and the Danish Further, it should be noted that Danish anti-avoidance tax treaties respectively. Consequently, the above Danish rules may reclassify a capital gain on shares as a dividend domestic withholding tax rates may apply to outbound distribution subject to Danish withholding tax when a Dan- payments of dividends, royalties and interests in cases of ish company is liquidated – or at an intercompany sale of avoidance pursuant to the GAAR. shares. Tax losses Royalties Tax losses incurred in 2002 and later may be carried for- According to Danish tax law withholding tax must be paid ward indefinitely. Carry back of tax losses is not possible. on all royalties for the use or the right to use patents, Reporting requirements must be complied with. Otherwise, trademarks, designs or models, plans, secret formulas or the tax losses are forfeited. processes, or information concerning industrial, commercial or scientific processes. Payments for the purchase of For income years beginning 1 July 2012 or later, tax loss underlying intangible assets are generally not subject to carry forwards up to DKK 8,025,000 (2017) can be set off in withholding tax. However, payments for access to know- an income year. Further tax loss carry forwards can only how may be deemed subject to withholding tax. reduce the remaining taxable income with up to 60 %. Any

14 Doing Business 2018 / Corporation Taxation part of the tax loss carry forwards in excess thereof must b) has controlling influence (directly or indirectly based on be set off in a subsequent income year. votes, shareholders agreement etc.) in the foreign or Danish company, and Certain restrictions exist on the sale of a company with tax c) the business of the foreign or Danish company is losses. The restrictions intend to prevent interest income considered financial (more than 50 % of total taxable and other passive financial income to be offset by tax income consists of taxable financial income), and losses carried forward. d) the financial assets of the company exceed 10 % of the total assets of the company. The restrictions apply if, at the end of the income year, more than 50 % of the share capital or more than 50 % The consequence of CFC taxation is that the controlling of the votes are owned by shareholders different from company is taxable on its (average) direct or indirect pro the shareholders at the beginning of the previous income rata share of the total income of the Danish or foreign year, in which the tax loss incurred. Further, if a company company, irrespective of the rules in a tax treaty, if any. does not have any financial risks in respect of commercial activities at the time of the change of ownership tax losses The rule also applies to foreign permanent establishments are forfeited. The rules do not prevent a tax loss company of a Danish company, if it would have been comprised by from changing its activities or type of business. The rule the CFC taxation had it been a company. also applies to foreign companies with a Danish permanent establishment. Filing a tax return Corporate tax returns must be filed annually, no later than Special rules apply for group companies (25 % holding of 6 months after the end of the income year. The final tax as- shares). A subsidiary’s tax loss carry forward may be re- sessment is normally issued at the end of October or at the stricted if a change of ownership takes place in the parent beginning of November. company. Payment and collection These rules also apply to group companies reclassified as Corporate tax is paid on account in two equal instalments, permanent establishments of foreign companies as men- in March and in November. The instalments are due on tioned under “Company residence and territoriality”. March 20 and November 20.

The restrictions do not apply to listed companies. The tax paid on account is collected automatically and calculated on the basis of 50 % of the average corporate tax In certain cases a tax loss carry forward may also be paid during the last three years. restricted or forfeited in connection with a capital recon- struction. Special rules apply for companies which did not pay or were not subject to corporate tax in the previous three CFC taxation (taxation of Controlled Financial Companies) years. A company is subject to CFC taxation on profits from Dan- ish or foreign subsidiaries in the following situation: Companies may voluntarily pay additional on-account tax. Such payments must be made no later than March 20 and a) The company is a direct or indirect shareholder in the November 20 of the income year (voluntary on-account tax foreign or Danish company, and exceeding the 20 November payment may be paid in until 1 February in the following calendar year).

Corporation Taxation / Doing Business 2018 15 Tax audits Such interest charges and fines are not deductible for tax Tax audits of companies are not performed on a regular purposes. basis. However, the tax authorities perform tax audits on a number of companies and branches every year. Statute of limitations The statute of limitations is three years and four months. Further, areas targeted for special initiatives are made As to transfer pricing adjustments, the statute of limita- public annually. tions is extended to five years and four months. This is also the case with respect to certain tax exempt restructures. Penalties A penalty is payable for late filing of a tax return. Further, a floating penalty interest of 0.8 % per month (2017) on over- due corporate tax is charged on the outstanding balance.

16 Doing Business 2018 / Corporation Taxation Calculation of the taxable income

General comments dent within EU/EEA/a tax treaty country – from Danish or The taxable income is determined on the basis of the result foreign companies are tax-free as of day one, if either shown in the statutory annual report adjusted to comply with the prevailing tax provisions. a) The receiving company owns at least 10 % of the distributing company, and Tax accounts generally determine costs and income when legally incurred. The accruals principle is acceptable in b) the distributing company is comprised by taxation rules certain situations. and taxed on its net income respectively in its country of tax residency, and Usually there are adjustments between the profit for accounting purposes and the income for tax purposes. Some c) the tax authorities in its country of tax residence of the most common adjustments include non-taxable exchange information with the Danish tax authori- income, non deductible expenses, depreciation, provisions ties under a tax treaty/an international agreement/an for bad debts or obsolescence, and provisions made for administrative tax assistance agreement, and guarantee purposes. d) the distribution cannot be deducted for tax purposes by The tax provisions listed below are those most commonly the distributing company, and applied when determining the taxable income of a company or a registered branch office. There are specific provisions e) the distribution cannot be deducted for tax purposes by for companies engaged in certain business areas such as any underlying company without subsequent taxation banking, insurance, investment funds, and the oil and gas in a receiving company if further, withholding tax at industry. These particular provisions are not dealt with in re-distribution is not protected under the EU Parent/ this publication. Subsidiary Directive,

Stock valuation or if Stock and work in progress may – for tax purposes – be stated at the market/replacement cost, at cost based on a) the receiving company has decisive influence in the distri- the FIFO principle or at production cost. The base stock and buting company (due to votes, shareholder agreement, LIFO methods are not accepted. For each group of stock etc.) whereby the companies may either be subject to items the company may select one of the three methods of compulsory Danish joint taxation or could participate in a pricing. Slow moving and obsolete stocks can be depreciated voluntary Danish international joint taxation, and to the net realisable value on an individual item basis or ac- b) the distribution cannot be deducted for tax purposes by cording to guidelines approved by the Danish tax authorities. the distributing company and Provisions for future losses and general provisions are not c) the distribution cannot be deducted for tax purposes by considered deductible against taxable income. any underlying company without subsequent taxation in a receiving company if further, withholding tax at re- Costs must include direct costs, e.g. freight, duty, etc. It is distribution is not protected under the EU Parent/Subsi- possible – but not a requirement – to include overheads. diary Directive.

Dividend income A transparency rule applies when determining the qualifica- Dividends received by a Danish company – or by a Danish tion of the shares. permanent establishment of a foreign company tax resi-

Calculation of the taxable income / Doing Business 2018 17 The rule also applies to dividend receiving companies when a gain is realised unless the mark-to-market prin considered transparent under the Danish anti-avoidance ciple is chosen. The corporate tax rate of 22 % applies. tax rules mentioned above under “Company residence and territoriality”. Capital gains on unquoted portfolio shares may be tax exempt. Due to General Anti-Avoidance Rules (GAAR) covering transactions under the EU Parent/Subsidiary Directive A capital gain on shares in qualifying companies is tax and the Danish tax treaties, the above tax exemption for exempt if dealing with: inbound dividends may be denied in cases of avoidance pursuant to the GAAR. a) At least 10 % ownership in a company resident in Den- mark or in a foreign company qualifying as a company Otherwise, dividends are taxable at the corporate tax rate under Danish rules and comprised by taxation rules of 22 %. If the shares in the distributing company qualifies and taxed on its net income in its country of tax resi- as portfolio shares in an unlisted company, only 70 % of the dency, provided the tax authorities in its country of tax dividend distribution is subject to the 22 % taxation, pro- residency exchange information with the Danish tax vided the distributing company cannot deduct the distribu- authorities under a tax treaty/an international agree- tion for tax purposes. ment/an administrative tax assistance agreement, or b) shareholding in group companies (decisive influence Capital gains and losses whereby the companies may either be subject to com- Capital gains and losses are normally treated as taxable pulsory Danish joint taxation or could participate in a income. Such gains and losses are computed in accord- voluntary Danish international joint taxation). ance with specific rules. Taxable net gains are included in the ordinary income of the company for each financial A transparency rule applies when determining the qualifi- period and are subject to corporate tax at the ordinary tax cation of the shares. rate of 22 %. Danish anti-avoidance tax rules may reclassify tax exempt In addition to the taxation of the selected assets described gains as taxable dividend distributions in certain intercom- below there is also a highly complex set of rules ap- pany share transfers. plicable to the taxation of gains and losses on financial instruments, such as bonds, securities, forward contracts, Further, General Anti-Avoidance Rules (GAAR) covering the futures and options. EU Parent/Subsidiary Directive and the Danish tax treaties may overrule the tax exemption in cases of avoidance These rules are not described here. The overall principle pursuant to the GAAR. for the general taxation of such areas is the mark-to-market principle. Losses If dealing with portfolio shares subject to the mark-to- Shares market principle, losses can be deducted in the company’s Gains taxable income. Listed portfolio shares are subject to taxation on the mark- to-market principle (compulsory), whereby increases in If a gain on unquoted portfolio shares or on the shares in a value are taxed annually. Other shares may only be taxed qualifying company is tax exempt, a loss on such shares is not tax-deductible.

18 Doing Business 2018 / Calculation of the taxable income Real property Machinery and equipment Gains The proceeds from the sale of machinery and equipment Capital gains from the sale of real property are tax-liable. are deducted from the depreciation pool.

When determining a gain, a five-step procedure must be The concept of the depreciation pool is described in the followed: following under “Depreciation”. If the depreciation pool becomes negative after the deduction of sales proceeds, this 1. The purchase price and the sales price of the real prop- negative amount may be recognised in the same year or erty are adjusted to cash values. deferred to the next year, except if subsequent purchases in that year exceed the negative amount. 2. The total amount of tax depreciation and write-offs during the ownership period is calculated. Goodwill Capital gains from the sale of goodwill are tax-liable 3. Tax depreciation is recaptured as the lower of (a) sales and losses are tax-deductible. Gains and losses must be price less written off value and (b) accumulated depre- restated at cash values. Profits and losses arising from the ciation. sale of goodwill are calculated as the difference between the cash value of sales proceeds and the written-down 4. Depreciation, losses or write-offs, which have not been value for tax purposes. recaptured, reduce the purchase price when calculating the taxable gain on the property. Know-how, patents and trademarks, etc. Gains and losses relating to the disposal of know-how, 5. The taxable gain is reduced, depending on the period of patents and trademarks, etc. are taxable. ownership. Gains and losses must be restated at cash values. A capital gain is taxed at the corporate tax rate of 22 %. Profits and losses arising from the sale of such intangible However, roll-over relief is available, if a new property is assets are calculated as the difference between the cash acquired for the use of the business prior to the end of the value of sales proceeds and the written-down value for tax year following the year of disposal. purposes.

Losses Gains and losses from currency exchange adjustments Losses from the sale of real property are only tax-deduct- Gains from currency exchange adjustments are taxable and ible, if the primary object of the company is to trade real losses are deductible. Companies may choose to include property. Yet, losses can be carried forward indefinitely gains and losses in the taxable income on a mark-to-mar- (unless incurred prior to 2002). ket principle if the mark-to-market principle is also chosen for receivables between group companies or payments If a property is tax-depreciable, the difference between the received for goods and services delivered. written-down value and the sales price is tax-deductible. However, this loss reduces the purchase price when calcu- Deductions lating the capital gain. Please see above. Business expenses Generally, expenses are deductible if incurred in order to “obtain, secure and maintain” the income.

Calculation of the taxable income / Doing Business 2018 19 Capital expenditure annual tax refund – a maximum of DKK 5,500,000 – equiva- lent to the tax value of R & D losses up to DKK 25 million – Generally, capital expenditure is not deductible, except for may be granted by the Danish tax authorities (on request). minor acquisitions at a purchase price of less than DKK If so, the corresponding tax loss cannot be carried forward 13,200 (2017). to subsequent years.

Alternatively, this expenditure can be capitalised and de- Computer software preciated using the general rules. The costs of computer software can be fully deducted in the year of acquisition. Formation costs Formation costs are no longer tax-deductible or amortis- Entertainment expenses able. Only 25 % of entertainment expenses are tax-deductible. The definition of entertainment expenses is very broad and Research and development costs includes gifts to customers and others. R & D costs within most areas are either tax-deductible or tax-depreciable if a few requirements are met. Further, an

20 Doing Business 2018 / Calculation of the taxable income The rules do not apply to expenses related to the employ- Balance brought forward ees of the company. Such expenses are fully tax-deductible. ÷ Sales proceeds during the year + Balance transferred from leasing assets Advertising costs are also fully tax-deductible. + Cost price of the assets acquired during the year = Basis for calculation of depreciation Provisions for bad debts Recognised losses on accounts receivable are deductible. Specific rules apply to leased machinery and equipment. Provisions for bad debts are deductible to the extent that the final losses on specified debtors can be substantiated. Machinery and equipment used for leasing purposes Leased machinery and equipment cannot be depreciated in Depreciation the year of acquisition. Tax depreciation is calculated according to the below rules, irrespective of the method applied for accounting purposes. Instead, the balance is brought forward to the next year to be depreciated by 50 %. In the third year, the balance Machinery and equipment is transferred to the ordinary balance of machinery and Machinery and equipment may include aircrafts, mo- equipment. tor vehicles, passenger cars, office machines, and office equipment. Buildings Buildings can be depreciated on an individual basis using a Most machinery and equipment is included in one single straight line method with an annual depreciation rate of 4 %. depreciation balance and are depreciated as a single asset pool up to 25 % a year (declining balance method). In general, buildings used for commercial purposes – except office buildings and residential property – are tax-depreciable. However, new machinery (except passenger cars and ships) bought in the period 30 May 2012 – 31 December In certain cases an office building attached to a depreciable 2013 may be depreciated at a rate of 115 % (on a separate building may be depreciated. balance). Under certain conditions artistic adornment may be depre- Operating equipment with a long economic life, i.e. certain ciated according to the same rules as apply to the adorned ships, aircrafts, trains, drilling rigs and other plants within building. the hydrocarbon area and some utility plants are depreciated on a separate balance. The depreciation rate is 15 % in 2017. Expenses for rebuilding and improvement are deductible, if the annual expenses for rebuilding, improvement and Utility distribution plants, railroad tracks and radio, televi- maintenance do not exceed 5 % of the depreciation basis at sion and telecommunication distribution plants are depre- the beginning of the year. ciated at a maximum rate of 7 %. Losses on depreciable buildings are deductible, yet losses The depreciation basis at the end of a given year is calcu- reduce the taxable purchase price of the building when lated as follows: calculating the capital gain.

Calculation of the taxable income / Doing Business 2018 21 Amortisation of intangible assets royalties, if the charges include payments for the right to Intangible assets are generally amortised over seven use technical know-how, etc. years. An annual amortisation, which is not utilised is not forfeited. Amortisation is made on a straight line basis and Management charges must be supported by detailed con- is determined on a cash basis. The amortisation principles tracts in written with enclosure of the underlying docu- vary for the different types of intangible assets. mentation, including the calculation of such charges.

Goodwill Shareholder loans Goodwill acquired in 1998 or later can be amortised over Danish taxation may apply to shareholder loans granted to seven years. individuals on 14 August 2012 or later. If so, the loan is reclassified as either a taxable salary or a dividend distribu- Know-how, patents and copyrights tion up front when paid. The notion ”shareholder loan” also Basically, know-how, patents and copyrights can be comprises collateral and other dispositions. amortised over seven years. Specific rules apply, if the protection time of the intangible asset is shorter than Intercompany loans seven years. Alternatively, know-how and patents are fully Companies will only be affected by thin capitalisation rules, tax-deductible in the year of acquisition according to the if the equity makes up less than 20 % of the balance sheet owner’s own choice. amount at the end of the income year and the controlled debt exceeds DKK 10 million. Leasehold improvements Leasehold improvements can be amortised over the period Third party debt is comprised by the rules, if the third party of the rental contract. However, the annual amortisation has received guarantees, etc. (directly or indirectly) from cannot exceed 20 %. Specific rules apply, if the period of a group company. The non-deductible part of the interest the rental contract is unknown. expenses is the part of the controlled debt, which should be converted into equity in order to meet the debt-to-equity Intercompany transactions rate of 4:1 (a minimum of 20 % equity). Payments made from Denmark to abroad for goods and services are normally deductible for tax purposes provided that The limitation will not apply if up-front the company can they are charged on “arm’s length” conditions. Expenses prove that a similar financing can be obtained with an inde- charged from a foreign head office to a Danish branch are pendent party. In that case, the solvency ratio in the line of generally not recognised for tax purposes. Instead, the Dan- business in question will be taken into consideration. ish branch can deduct a proportional amount of the general and administrative expenses of the head office. A loss on intercompany accounts receivable is non-deductible except for documented trading losses and losses due Management charges, etc. to currency fluctuations. Payments of management charges to foreign companies for e.g. centralised research and development, advertis- As of 14 August 2012 loans from Danish and foreign lend- ing, IT and other management services, are generally ing companies to shareholders (individuals) with decisive deductible for tax purposes provided that the charges influence in the company (or to their relatives) are consid- are determined on “arm’s length” conditions. Part of the ered as deemed dividends and further, any interest thereon management charges may be subject to withholding tax as are taxable for the company (a taxable contribution). If the shareholder is employed by the company the amount may

22 Doing Business 2018 / Calculation of the taxable income instead be reclassified further salary for him (deductible Transfer pricing cost for the company). Danish permanent establishments and Danish companies engaged in transactions with a.o. group companies are Interest cap rule obliged to report summary information on these transac- An interest cap rule limits the tax deduction of net financial tions in their tax returns. They are also required to prepare expenses exceeding DKK 21.3 million. Such expenses are and keep written documentation of the prices and terms tax-deductible only to the extent they exceed a cap calcu- determined in their transactions. Further, an independent lated on the tax value of the company’s assets (calculated accountant’s opinion is required in certain specific situ- according to the rule) multiplied with a standard rate ations. Small companies are subject to reduced transfer (which is revised annually). pricing obligations. A penalty applies if there is no (or insufficient) documentation – a minimum of DKK 250,000 Finally, net financial expenses exceeding DKK 21.3 million plus 10 % of the further assessed taxable income. cannot reduce the taxable income before interest and tax (EBIT) by more than 80 %. Excess net financial expenses Denmark has implemented the OECD country-by-country (below the interest cap) are only deductible against future reporting for groups with a turnover of at least EUR 7.5 taxable income. million (on a consolidated basis).

Calculation of the taxable income / Doing Business 2018 23 Joint taxation In the determined joint taxable income, net tax losses In general carry-forwards up to DKK 8,025,000 (2017) in total can be The principle of joint taxation should not be mixed up with offset against profits in participating companies. Exceed- the concept of “filing a consolidated tax return”. ing net tax loss carry forward can only offset up to 60 % of the profits in the other companies. Any net tax loss carry Each separate company in a joint taxation must calculate forward in excess thereof must be offset in a subsequent its taxable income or loss on a “stand alone basis”. This income year provided these companies were all included in means that there is no elimination of unrealised profits on the joint taxation at the time of incurring the losses and that intercompany transactions, including sales of fixed assets, the joint taxation has not subsequently been interrupted. etc. For joint taxation purposes the taxable income or losses in foreign subsidiaries are calculated on the basis of Compulsory Danish joint taxation the Danish tax rules. Group companies subject to Danish taxation and Danish permanent establishments of foreign group companies and The taxable income or loss of each company in the joint their real property in Denmark are subject to compulsory taxation is then added up to determine the joint taxable national joint taxation in Denmark. income.

24 Doing Business 2018 / Calculation of the taxable income Foreign permanent establishments or real property of Dan- If voluntary international joint taxation is opted for, all for- ish group companies and foreign subsidiaries are not in- eign group companies and permanent establishments and cluded in the compulsory joint taxation (unless comprised real properties must be included in the joint taxation, i.e. by a few specific rules on e.g. CFC income). The definition foreign entities “below” Denmark (e.g. underlying subsid ‑ of a “group company” is similar to the definition in the iaries and their permanent establishments in third coun- Danish Financial Statements Act and the International Ac- tries) as well as foreign entities “above” Denmark (e.g. counting Standards, and reality overrules formalities when parent companies and their real property located in third determining “decisive influence”. countries).

The ultimate Danish parent company generally becomes A single Danish company with e.g. a foreign real property the management company of the jointly taxed group. If no may opt for voluntary international joint taxation with the such Danish parent company exists, but only sister com- foreign real property under these rules. panies, one of the sister companies becomes the management company. The request for voluntary international joint taxation must be filed with the Danish tax authorities no later than upon The management company must pay the tax on the joint submission of the tax return for the first income year, taxable income to the Danish tax authorities. where voluntary international joint taxation is requested.

All group companies are jointly liable for each company’s The choice of voluntary international joint taxation involves a share of the total tax on the joint taxable income – either binding period of ten years for the ultimate parent company principally or alternatively - and on its Danish withholding (however, the joint taxation may be interrupted in a few taxes on dividends, interests and royalties. specific cases). The binding period of ten years is not interrupted by the entering or leaving of other group companies. All jointly taxed companies must have the same income year as the management company, i.e. in some cases If the foreign ultimate parent company is not subject to full the income year of a new group company may have to be or limited Danish tax liability, the ultimate Danish parent changed. Alternatively, permission may be granted by the company is appointed the management company of the Danish tax authorities to change the income year of the group. If no such Danish company exists, but only Danish management company. sister companies, one of the sister companies is appointed.

If the group has not yet existed for a full income year, only The ultimate foreign parent company is jointly liable with the income in the period of its existence is included in the all group companies for the tax share of the joint taxable joint taxable income. Consequently, if companies enter or income relating to the foreign entities, but not for the tax leave the group, income tax returns must be prepared cover- share relating to the Danish entities. Furthermore, the ing the period until the companies enter or leave the group. above-mentioned rules concerning income year, etc. for the compulsory joint taxation also apply to group compa- Voluntary international joint taxation nies comprised by the voluntary international taxation. A group may choose to enter into voluntary joint taxation with foreign group companies and foreign permanent establishments and/or real property, respectively. The Danish or foreign ultimate parent company of the group makes the choice.

Calculation of the taxable income / Doing Business 2018 25 Taxation of individuals

Territoriality and residence The employees’ averagely monthly salaries in cash and Danish tax legislation distinguishes between full tax-liabil- certain fringe benefits must be at least approx. DKK 63,700 ity for resident individuals and limited tax liability for non- (2017) after deduction of Danish social contribution (ATP resident individuals. Citizenship does not affect tax liability. bidrag).

Residents are taxable on their worldwide income and capi- The tax and the labour market contribution are withheld by tal gains. Furthermore, residents are liable to pay gift tax. the employers as the final settlement of the tax liability.

There are no wealth taxes in Denmark. The salaries taxed at 26 % are not declared in the tax returns of the employees. Non-residents are taxed only on income and capital gains deriving from sources in Denmark. Expenses incurred in connection with earning the salary cannot be deducted. A tax loss from another income year Expatriates with high salaries cannot be offset against income taxed at 26 %. However, it Special legislation relates to foreign employees working can be offset against other income. temporarily in Denmark if they have not been subject to full or limited Danish taxation (on certain incomes) in the General rules for taxation of individuals previous ten years. Personal allowances A deduction from income tax is granted as a personal When certain conditions are met, foreign employees may allowance to each individual. The allowance amounts to choose to be taxed at a flat rate of 26 % on their gross sal- DKK 45,000 in 2017. ary income rather than being subject to the general rules of taxation of individuals (see below). The foreign employ- If a married person cannot utilise the total tax value of the ees must pay a tax-deductible labour market contribution allowance, the balance is transferred to the spouse. Spe- at a rate of 8 % resulting in a total tax of approx. 32 % on cific rules apply to married individuals subject to limited the gross salary income: tax liability only.

Danish tax computation Labour market contribution 8 % Taxable income is based on gross income less deduc- Tax, 26 % of 92 %, 23.92 % tions. If the tax return covers less than a calendar year, Total 31.92 % the income is generally annualised in order to reflect the full effect of the graduated system of taxation. The income tax consists of a two-tier state income tax, a flat rate state The foreign employees must work for Danish employers surtax “health care tax” and a flat rate local income tax. subject to full Danish taxation or for Danish branches or permanent establishments of foreign companies which State income tax may be required to have a legal representative in Denmark. Income and allowances are divided into three categories:

The 26 % taxation may be chosen for an aggregate period 1. Personal income – e.g. cash salary, director’s fee, free of 60 months. company car and free telephone – less pension contributions.

26 Doing Business 2018 / Taxation of individuals 2. Capital income – e.g. net interest income and net cap Local income tax ital gains. Church and local taxes are levied at flat rates. The rates are 3. Share income – e.g. dividend, profit/loss from shares. determined each year by the local authorities and vary for the different municipalities. The tax is levied on taxable in- Deductions are either included in computing the net come exceeding DKK 45,000. The average municipal tax rate income of the above categories or categorized as general is 24.91 % (2017). The average church tax is 0.87 % (2017). deductions when computing the taxable income. In addition, a health care tax at a flat rate of 2 % (2017) has A state tax at the rate of 10.08% (2017) is imposed on the replaced the former county tax. The tax is imposed on tax- total taxable income exceeding DKK 45,000. able income exceeding DKK 45,000.

Personal income in excess of DKK 479,600 plus positive net The tax rates for non-residents subject to limited tax liability capital income in excess of DKK 42,800 (if married, DKK are identical to the state tax rates for resident individuals 85,600) is taxed at a rate of 15 % (2017). together with a fixed local tax rate whereby the tax burden is almost identical to the tax burden of residents.

Taxation of individuals / Doing Business 2018 27 Deductions Inheritance tax Contributions to Danish social security (ATP), labour Inheritance from a deceased person, who was resident in market contribution, and to Danish pension schemes are Denmark at the time of his/her death, is subject to inherit- deductible from the personal income as well as certain ance tax divided into 2 categories. business expenses. However, deduction for payment to Danish pension schemes can only be made up to DKK The estate tax is a flat rate of 15 % of the value exceeding 53,500 (2017). Premiums to life insurances are however DKK 282,600 (2017) and is calculated on the basis of the unlimited. value of the whole estate.

Interest expenses are deductible from capital income. An additional tax of 25 % is levied on the value received by recipients, who were not closely related to the deceased. Certain transport expenses and alimonies are deductible Thus, the total effective tax rate is 36.25 %. from the taxable income. An earned income relief for expenses for e.g. allowance for extra costs of living, subscrip- Certain amounts are exempted from the tax duty, e.g. tions to professional associations and necessary business inheritance and insurance amounts accruing to the spouse literature is granted, if the total amount exceeds DKK 5,900 of a deceased person. (2017) per year. Gift tax Furthermore, a deduction of a maximum of DKK 30,000 Individuals, who are closely related to the donor, can in 2017 in the taxable income is granted for employed receive gifts without tax, if the cumulative value of all dona- persons. tions for one calendar year does not exceed DKK 62,900 (2017). Tax credits Individuals subject to Danish full tax liability are entitled to A child’s or a stepchild’s spouse can receive gifts tax-free, claim tax credits and/or tax exemption in respect of income if the cumulative value of all donations for one year does deriving from foreign sources. not exceed DKK 22,000 (2017).

Share income tax Gifts to spouses are tax-free. Dividend income and net capital gains on shares are taxed separately and at different flat tax rates: Net share income The gift tax is a flat rate of 15 %, and it is only imposed on up to DKK 51,700 (2017) is taxed at a rate of 27 % and any the above persons, if the cumulative value of the gifts for exceeding net share income is taxed with 42 %. one year exceeds the tax-free limits.

Employers can again offer tax favourable employee share There is an additional tax on gifts to stepparents and schemes to their employees if the agreement is made on grandparents, if the cumulative value of the gifts exceeds 1 July 2016 or later. The tax scheme only applies if certain DKK 62,900 (2017) for one year. The additional tax is calcu- conditions are met and further, the employers have report- lated at a flat rate of 25 %, resulting in a total effective tax ing obligations with respect hereto. rate of 36.25 %.

Gifts to other relatives or unrelated parties are treated as ordinary taxable income.

28 Doing Business 2018 / Taxation of individuals Value-added tax

Denmark applies the system of value-added tax (VAT) Distance selling – sale of goods to private customers established by the EU. Distance selling is when a company/business established and VAT-registered in another EU member state Denmark imposes VAT on imports and taxable deliveries sells goods to private customers in Denmark (e.g. via the of goods and services – unless specially exempted – at a internet) and handles the shipment or transportation of the standard rate of 25 %. goods (directly or indirectly). Only if such sale exceeds EUR 35,000, the company/business is required to register for A number of business activities are exempted from VAT. VAT in Denmark, charge 25 % Danish VAT on the sales and The most important ones are: hospital, medical and dental pay in the VAT to the Danish tax authorities respectively. care, insurance, banking, and certain financial activities. However, if the goods sold are subject to certain excise Entrepreneurs supplying taxable goods or services (includ- duties (such as alcohol, alcoholic beverages, fabricated ing branches or agencies of non-Danish companies) must tobacco and energy products) the company/business must register for VAT unless the reverse charge mechanism can always register in Denmark and pay in the Danish VAT. apply. Specific rule for foreign tourist busses Refund of Danish VAT is available for foreign companies not Due to a change in the Danish VAT Act, foreign bus opera- registered for VAT in Denmark. A company which is estab- tors providing tourist transport in Denmark need to reg- lished outside the EU and carrying out business in Den- ister for Danish VAT and pay in VAT in accordance with the mark may be required to register for Danish VAT purposes general rules of the Danish VAT Act. through a resident VAT agent.

Value-added tax / Doing Business 2018 29 Withholding taxes

Country Dividend Royalty Interest** Country Dividend Royalty Interest** Individuals, Qualifying Individuals, Qualifying companies companies* companies companies* Argentina 10/15 %a) 0 % 3/5/10/15 % 12 % Luxembourg h) 5/15 %a) 0 % 0 % 0 % Australia 15 % 0 % 10 % 10 % Macedonia 5/15 %a) 0 % 10 % 0 % Austria 0/15 %b) 0 % 0 % 0 % Malaysia 0 % 0 % 10 % 25 % Bangladesh 10/15 % b) 0 % 10 % 10 % Malta 0/15 % a) 0 % 0 % 0 % Belarus q) 15 % 0 % 0 % 0 % Mexico 0/15 % a) 0 % 10 % 5/15 % Belgium 0/15 %a) 0 % 0 % 10 % Montenegro m) 5/15 % a) 0 % 10 % 0 % Brazil 25 % 0 % 15/25 % 15 % Morocco 10/25 % a) 0 % 10 % 10 % Bulgaria 5/15 %a) 0 % 0 % 0 % Netherlands 0/15 % b) 0 % 0 % 0 % Canada 5/15 %a) 0 % 0/10 % 10 % New Zealand 15 % 0 % 10 % 10 % Chile 5/15 %a) 0 % 5/10 % 5/15 % Norway 0/15 % b) 0 % 0 % 0 % China 5/10 %a) 0 % 10 %o) 10 % Pakistan 15 % 0 % 12 % 15 % Croatia 5/10 %a) 0 % 10 % 5 % The Philippines 10/15 % a) 0 % 15 % 10 % Cyprus 0/15 %b) 0 % 0 % 0 % Poland 0/5/15 % a), i) 0 % 5 % 5 % Czech Republic 15 % 0 % 10 % 0 % Portugal 0/10 % f) 0 % 10 % 10 % Egypt 15/20 %a) 0 % 20 % 15 % Romania 10/15 % a) 0 % 10 % 10 % Estonia 5/15 %a) 0 % 5/10 % 10 % Russia 10 % 0 % 0 % 0 % Faroe Island 0/15 %c) 0 % 0 % 0 % Serbia 5/15 % a) 0 % 10 % 10 % Finland 0/15 %c) 0 % 0 % 0 % Singapore 0/5/10 % a), i) 0 % 10 % 10 % France d) N/A 0 % N/A N/A Slovak Republic 15 % 0 % 5 % 0 % Georgia 0/5/10 %b), e) 0 % 0 % 0 % Slovenia 5/15 % a), i) 0 % 5 % 5 % Germany 5/15 %b) 0 % 0 % 0 % South Africa 5/15 % a) 0 % 0 % 0 % Ghana 5/15 %b) 0 % 8 % 0 % Spain d) N/A 0 % N/A N/A Greece 18 % 0 % 5 % 8 % Sri Lanka 15 % 0 % 10 % 10 % Greenland 0/15 %a) 0 % 10 % 0 % Sweden 0/15 % b) 0 % 0 % 0 % Hungary 0/15 %a), b) 0 % 0 % 0 % Switzerland 0/15 % b) 0 % 0 % 0 % Iceland 0/15 %c) 0 % 0 % 0 % Taipei (Taiwan) 10 % 0 % 10 % 0/10 % India 15/25 %a) 0 % 20 % 10/15 % Tanzania 15 % 0 % 20 % 12.5 % Indonesia 10/20 %a) 0 % 15 % 10 % Thailand 10 % 0 % 5/15 % 10/15 % Ireland 0/15 %a) 0 % 0 % 0 % Trinidad and 10/20 % n) 0 % 15 % 15 % Israel 0/10 b) 0 % 0 % 5 % Tobago Italy 0/15 %a) 0 % 5 % 10 % Tunisia 15 % 0 % 15 % 12 % a) Jamaica 10/15 %a) 0 % 10 % 12.5 % Turkey 15/20 % 0 % 10 % 15 % a) Japan 10/15 %a) 0 % 10 % 10 % Uganda 10/15 % 0 % 10 % 10 % a) Kenya 20/30 %a) 0 % 20 % 20 % Ukraine 5/15 % 0 % 10 % 0/10 % f) Korea rep. (South) 15 % 0 % 10/15 % 15 % United Kingdom 0/15 % 0 % 0 % 0 % j), b) Kuwait p) 15 % 0 % 10 % 0 % United States 0/5/15 % 0 % 0 % 0 % a) Kyrgyzstan q) 15 % 0 % 0 % 0 % Venezuela 5/15 % 0 % 5/10 % 0/5 % k), l) Latvia 5/15 %a) 0 % 5/10 % 10 % Vietnam 5/10/15 % 0 % 5/15 % 10 % Lithuania 5/15 %a) 0 % 5/10 % 0/10 % Zambia 15 % 0 % 15 % 0/10 %

a) Lower rate at 25 % ownership. * (According to domestic rules either a 10 % direct ownership is b) Lower rate at 10 % ownership. required or the distributing company must be a group company. A c) Zero rate at 10 % ownership. transparency rule may apply). d) The tax treaty has been cancelled. ** (According to domestic rules withholding tax on interest only applies e) Zero rate at 50 % ownership. to interest payments from a controlled Danish company to a foreign f) Zero rate if the EU Parent/Subsidiary Directive applies. company. “Control” is defined as ownership of more than 50 % of g) Lower rate at 50 % of the votes. the share capital or votes. No withholding tax applies if the foreign h) The treaty does not apply to 1929 Luxembourg holding companies. company is protected by either the EU Interest/Royalty Directive or a i) 5 % rate if paid to approved entity. tax treaty with Denmark (reduction/waiver) or if the foreign company j) Zero rate at 80 % of the votes. is controlled by a Danish company or by another foreign company in k) 5 % at 70 % ownership/an investment of 12 million USD. a tax treaty country imposing CFC taxation on the received interest l) 10 % rate between 25 % and 70 % ownership. or if the receiving foreign company is taxed thereon with at least 3/4 m) The tax treaty with the former Yugoslavia. of the Danish corporate tax rate). n) 10 % at 25 % of the votes. o) of either gross amount or 70% of gross amount. p) Zero rate at 25 % ownership for at least one year. q) The tax treaty with the former USSR.

Editor: Ebbe Melchior (in chief) and Anne Mailund.

Graphic production: VINK design.

Disclaimer: The information contained in this publication is not intended to be advice on any particular matter.

No reader should act on the basis of any matter contained in this publication without considering appropriate professional advice.

Revitax A/S and the auditors and editors, expressly disclaim all and any liability to any person in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon the contents of this publication.

Acknowledgement must be made for any article reproduced.

Withholding taxes / Doing Business 2018 31

BRANDT, Statsautoriseret Revisionspartnerselskab, Thisted / Hurup / Hanstholm / Nykøbing Mors / Fjerritslev / Skive / Kolding / Fredericia / Esbjerg / Aarhus / København

Buus Jensen, Statsautoriserede Revisorer, København

Baagøe Schou, Statsautoriseret Revisionsaktieselskab, København

Christensen Kjærulff, Statsautoriseret Revisionsaktieselskab, København

GLB REVISION, Statsautoriserede Revisorer A/S, Køge / København

Grant Thornton, Statsautoriseret Revisionspartnerselskab, København / Farum

Grønlands Revisionskontor A/S, Statsautoriserede revisorer, Nuuk

Januar, løggilt grannskoðanarvirki, Tórshavn

Kovsted & Skovgård, Statsautoriseret revisionsaktieselskab, Ebeltoft / Rønde / Aarhus

Krøyer Pedersen, Statsautoriserede revisorer I/S, Holstebro / Struer / Ulfborg

Kvist & Jensen, Statsautoriserede revisorer, Grenaa / Hadsten / Hadsund / Hammel / Randers / Aalborg

Martinsen, Statsautoriseret Revisionspartnerselskab, Esbjerg / Grindsted / Kolding / København / Skjern / Tørring / Vejen / Vejle / Aarhus

Nejstgaard & Vetlov, Statsautoriseret Revisionsaktieselskab, Allerød

One Revision, Statsautoriserede Revisorer, Pandrup / Frederiksberg / Bording / Vejle / Silkeborg

Partner Revision, Statsautoriseret revisionsaktieselskab, Herning / Ikast / Silkeborg / Brande / Ringkøbing / Skjern / Ølgod / Give / Videbæk

PKF Munkebo Vindelev, Statsautoriseret Revisionsaktieselskab, Glostrup

Redmark, Statsautoriseret Revisionspartnerselskab, Aalborg / Aars / Aarhus / København

RIR Revision, Statsautoriseret Revisionspartnerselskab, Roskilde / Holbæk

Sønderjyllands Revision, Statsautoriseret revisionsaktieselskab, Aabenraa / Padborg / Sønderborg

Tranberg, Statsautoriseret Revisionsaktieselskab, Svendborg

Ullits & Winther, Statsautoriseret Revisionspartnerselskab, Viborg

Vestjysk Revision, Statsautoriseret revisionsaktieselskab, Lemvig / Thyborøn